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January 15, 2009

Lilly Said to Be Near $1.4 Billion U.S. Settlement on Drug

Eli Lilly,
the drug company, is expected to agree as soon as Thursday to pay $1.4
billion to settle criminal and civil charges that it illegally marketed
its blockbuster antipsychotic drug Zyprexa for unauthorized use in
patients particularly vulnerable to its risky side effects.

The amount of the settlement is a record sum for so-called corporate
whistle-blower cases, which are federal lawsuits prompted by tips from
company employees or former employees. Details of the agreement were
provided by people involved in the negotiations.

Among the charges, Lilly has been accused of a scheme stretching for
years to persuade doctors to prescribe Zyprexa to two categories of
patients — children and the elderly — for whom the drug was not
federally approved and in whom its use was especially risky.

In one marketing effort, the company urged geriatricians to use
Zyprexa to sedate unruly nursing home patients so as to reduce “nursing
time and effort,” according to court documents. Like other
antipsychotics, Zyprexa increases the risks of sudden death, heart failure and life-threatening infections like pneumonia in elderly patients with dementia-related psychosis.

The company also pressed pediatricians and family practice doctors
to treat disruptive children with Zyprexa, court documents show, even
though the medicine’s tendency to cause severe weight gain and
metabolic disorders is particularly pronounced in children. Over the
last decade, Zyprexa’s use in children has soared.

The case is being prosecuted by the United States attorney’s office
for the Eastern District of Pennsylvania. Patricia Hartman, a
spokeswoman for the office, declined to comment.

Angela Sekson, a Lilly spokeswoman, said she could not comment on
the status of the Zyprexa negotiations. Last fall, the company,
anticipating a settlement, had set aside $1.4 billion for that purpose.

Lilly executives have for years insisted that the company’s Zyprexa
marketing efforts were legal and appropriate. When asked whether she
could repeat those assurances, Ms. Sekson said, “It would be
inappropriate for me to comment further right now.”

It could not be confirmed on Wednesday whether the company would
acknowledge wrongdoing as part of the settlement. Without a settlement,
Lilly risks being barred from participating in the federal Medicaid and Medicare
programs — a huge part of its business — even though such bans are
almost unheard of for big drug makers because their products are
considered so essential.

In the United States, most of Zyprexa’s sales are paid for by
government programs because so many of those taking Zyprexa are
indigent or disabled. Zyprexa had sales of $4.8 billion in 2007, making
it the biggest seller by far for Lilly, whose revenue that year was
$18.6 billion. Depending on dosage, the drug can cost as much as $25
for a daily pill.

The settlement may have little impact on how doctors actually use
Zyprexa, because physicians are free to prescribe drugs as they see
fit. But drug makers are barred from promoting drugs for uses not
specifically approved by the Food and Drug Administration.

Just about every major drug company in recent years has pleaded
guilty or is under investigation for urging doctors to use medicines
beyond their approved uses. The Zyprexa case and others were brought by
former drug company employees using a Civil War-era whistle-blower law
to assert that the companies defrauded government health programs. The
former employees usually share in the recovery.

The Zyprexa settlement would be the largest such recovery in history, surpassing the $900 million fine that Tenet Healthcare
paid in 2006 to resolve whistle-blower assertions that it improperly
billed Medicare. In 2001, TAP Pharmaceutical agreed to pay $875 million
to resolve criminal and civil charges related to pricing and marketing
of its cancer drug Lupron.

But while the fines in such cases involving drug makers have been
substantial, they generally recover only a fraction of the costs
associated with unapproved drug uses.

Zyprexa, for instance, has generated more than $39 billion in sales
since its approval in 1996, making it one of the biggest-selling drugs
in the world. As much as half of Zyprexa’s use is estimated to be for
unapproved or “off label” use, the $1.4 billion fine — punishment for years of illegal marketing efforts — represent less than one year of off-label sales of the drug.

And despite mounting concern about Zyprexa’s risks and the negative
publicity surrounding the legal case, sales were $3.5 billion for the
first nine months of 2008, 2 percent higher than in the first nine
months of 2007.

Zyprexa was initially received as a significant advance over an
earlier generation of antipsychotics. But a series of landmark studies
in recent years have cast doubt on that long-held view and suggested
that Zyprexa was no better than older drugs that sell for far less.

A government study published in September, for instance, found that
Zyprexa was no more effective in children than an older medicine but
caused more serious side effects. The children receiving Zyprexa gained
so much weight during the study that a safety monitoring panel ordered
that they be taken off the drug.

In December 2006, The New York Times published articles detailing
hundreds of internal Lilly documents and e-mail messages among top
company managers that showed how the company sought for years to play
down Zyprexa’s tendency to cause severe weight gain and metabolic
disorders, including diabetes, while promoting unapproved uses.

One 2000 e-mail message, for instance, described how a group of
diabetes doctors that Lilly had retained to consider potential links
between Zyprexa and diabetes had warned the company that “unless we
come clean on this, it could get much more serious than we might
anticipate.”

The government’s case will remain sealed until at least Thursday,
when a judge is expected to approve the settlement. People involved in
the negotiations say that prosecutors pressed for a resolution in the
waning days of the Bush administration to avoid having to get another
set of approvals from new bosses at the Justice Department in
Washington.

While the settlement is intended to resolve all pending government
claims, it is unclear whether all states, which are parties to the case
through the federal-state Medicaid program, have agreed to terms.

Some of the claims and evidence in the government’s case are similar
to those made in a pending California state whistle-blower lawsuit in
which Jaydeen Vicente, a former Lilly sales representative, described
years of what she said were illegal Zyprexa marketing efforts.

Ms. Vicente asserted, for instance, that Lilly paid kickbacks to
doctors who prescribed large amounts of Zyprexa by hiring them to
educate other doctors through a “speaker’s program” or by sending
doctors to posh resorts where they were trained to be speakers.

“The speaking engagements were frequently a mere sham,” Ms.
Vicente’s lawsuit states. “Lilly-paid speakers were even paid to give
pointless presentations to their colleagues at the health care facility
with which they were affiliated.”

The drug industry continues to hire tens of thousands of doctors to serve as part-time marketing representatives, although medical schools and societies increasingly frown on the practice.

Ms. Vicente was hired in 2000 to join a 160-person “Long Term Care” sales team that focused on nursing homes “despite the lack of any clinical trials or F.D.A. approval for the use of Zyprexa in the elderly,” the lawsuit states.

“In truth, this was Lilly’s thinly veiled marketing of Zyprexa as an
effective chemical restraint for demanding, vulnerable and needy
patients,” the lawsuit states.

In October, Lilly agreed to pay $62 million to 32 states and the
District of Columbia to settle consumer protection claims related to
Zyprexa. It paid Alaska $15 million and agreed to pay $1.2 billion to
31,000 Zyprexa plaintiffs. Some private Zyprexa claims remain
unresolved.